Bellevue Healthcare Strategy

Global equity markets accelerated over the month of August, with the MSCI World Index gaining 2.58% (in USD) on a net return basis. Healthcare outperformed the market for the third consecutive month, with the MSCI World Health Care Index up 3.7% (in USD) on a net return basis. The Bellevue Healthcare Strategy (Lux) Fund – I shares returned 2.5%, underperforming its benchmark by 126 bp. An overweight allocation to Asia and Emerging Markets contributed positively, but was offset by an underweight allocation to the US.

Looking at global equities, the main drivers during August were continued Iran-US tensions, oil prices returning above USD 80, yield volatility and Nvidia's earnings.

The yield curve moved up with initial steepening driven by perceived concerns around a lack of demand for long-dated bonds. Yields flattened into month-end driven by increasing yields at the short end. This was driven by a sharp re-pricing of hike probability at the September meeting following Warsh's commentary from Jackson Hole.
Healthcare sector performance was broad-based, with Pharma (+1.1% return contribution) and Biotech (+1.5%) contributing more than half of the sector's performance (2.6% out of 3.71%). From a geographic point of view, the US drove most of the sector’s performance (3.3%), with Asia also contributing positively (0.36%), while Europe was a detractor (-0.9%).

August's most consequential clinical event was the Moderna/Merck personalized mRNA cancer vaccine, which met its primary endpoint in a large Phase 3 melanoma trial on 19 August, reducing recurrences versus Keytruda alone. Moderna rose ~160% on the day, while Merck gained 11%. On the approval front, Revolution Medicines secured FDA clearance for Rasonque (daraxonrasib), the first RAS-targeted oral therapy in pancreatic cancer, nearly doubling median overall survival to 13.2 months versus 6.7 months for chemotherapy. On policy, the Trump administration reached most-favored-nation drug pricing agreements with nine pharmaceutical companies, requiring Medicaid prices to match the lowest prices charged in other developed nations.

Top absolute performers in the fund included GenScript Biotech (+36.3%; Q2 earnings), CSL (+27.2%; strong FY2026 revenue), and WuXi Biologics (+26.1%; 1H 2026 earnings).

Top relative positive contributors included Otsuka Holdings (overweight; +26 bp; strong Phase III VISIONARY results in IgAN), WuXi AppTec (overweight; +20 bp; a US judge blocked the Department of Defense from enforcing restrictions on the company), and WuXi Biologics (overweight; +20 bp; strong H1 2026 earnings).

Top negative relative contributors included Pfizer (not invested; -24 bp; Q2 beat and raise), CVS Health Corp (not invested; -20 bp; 2027 Caremark PBM membership losses), and Amgen (underweight; -19 bp; Q2 earnings).

The near-term backdrop remains uncertain, with elevated oil prices, higher-for-longer interest rates, and unresolved geopolitical tensions. The approaching US midterms as well as unstable interest rate expectations may lead to increased volatility.

Despite this, equity markets have been resilient. Rate sensitivity and supply chain complexity warrant vigilance, though healthcare's defensive characteristics should provide relative stability if conditions deteriorate further.

The structural case for healthcare remains intact and increasingly compelling. Regulatory uncertainty has materially eased, valuations remain near decade lows, and biopharma fundamentals continue to stabilize.
At current valuations, Medtech looks increasingly attractive, with strong fundamentals driven by innovation in new therapeutic areas such as renal denervation and pulse-field ablation. Healthcare contributes approximately 18% of US GDP yet represents only around 6% of the S&P 500, close to 20-year lows.

Biotechnology continues to transition toward cash-generative, launch-driven business models, while large-cap pharma faces a biologic patent cliff between 2029 and 2032 and holds over USD 200 bn in acquisition capacity, underpinning a multi-year M&A cycle.

The fund maintains a high-conviction, global approach, positioned to capture the structural recovery and near-term catalyst-driven opportunities.